Rice supply faces new threat as India mulls more limits

India, the world’s biggest rice exporter, is considering more restrictions on its shipments of the grain as the nation grapples with rising food prices, a move that’s likely to further tighten global supply.

The government is considering a tax on shipments of parboiled rice, according to people familiar with matter. No decision has been made yet and there’s no certainty deliberations will lead to duties being imposed, they said, asking not to be identified as the information is confidential. India’s food secretary told reporters on Tuesday that there are currently no plans for tariffs.

Rice in Asia soared to the highest level in almost 15 years this month after the South Asian nation announced a ban on some exports and on concerns around the outlook for Thailand’s production. The government of India’s Prime Minister Narendra Modi has stepped up efforts to cool domestic food prices ahead of an election early next year, recently targeting the rising cost of onions. 

There is no proposal as of now to restrict parboiled shipments, India’s Food Secretary Sanjeev Chopra said in New Delhi. There is also no plan to import wheat from Russia through diplomatic deals, he added, following recent reports that the Asian nation was examining the prospect of imports.

Parboiled rice accounts for about one-third of India’s total rice shipments. The nation has already banned exports of broken rice and non-basmati white rice, curbed shipments of wheat and sugar, and restricted stockpiling of some crops. The nation is also considering abolishing a 40% import levy on wheat and selling tomatoes and grains from state reserves to improve supplies.

Rainfall in the key rice growing states of West Bengal, Uttar Pradesh, Bihar, Jharkhand, Chhattisgarh and Andhra Pradesh has been 15% lower than normal so far this season, raising concerns about domestic supply. India produces around 135 million tons each year and exports about 21 million tons.   

Food prices have jumped after extreme weather ranging from floods to heat waves damaged some crops, with retail inflation surging to a 15-month high in July. The government is considering a plan to reallocate as much as 1 trillion rupees ($12 billion) from the budgets of various ministries to contain a surge in food and fuel costs, according to people familiar with the matter.

The government has been trying to appease consumers ahead of some key state polls later this year and the national election in April or May 2024, with Modi seeking a third five-year term. High prices of food have prevented some ruling parties in the past from returning to power.